Joint
Subcommittee to Study and Revise Virginia's State Tax Code

HJR 60 (2002)
HJR 685/SJR 387 (2001)

July 16, 2002

Task Force #1

The committee’s meeting began with a presentation
on the Earned Income Tax Credit from Bob Zahradnick, a policy analyst
with the Center on Budget & Policy Priorities.

The task force came to a consensus that a state earned
income tax credit is not an option. Instead the group is looking toward
an aggressive approach to deductions and changing the rate structure.
Additional discussion ensued around removing the sales tax from food.

Following the EITC speaker, the task force began its
work session, picking up where it ended its June 24th meeting.
The task force began its session with a discussion of the fiscal impact
associated with a 100% repeal of the personal property tax to include
personal vehicles, business vehicles as well as machinery and tools.

Staff gave a brief update on the work of the Telecommunications
subcommittee chaired by Delegate Preston Bryant. The subcommittee will
continue its work by looking at the changes recently made in other states
including Florida, North Carolina and Illinois and will report to the
joint subcommittee studying the state tax code later this year.

The following issues, identified during previous task
force meetings, were presented by Staff and discussed by committee members:

Appropriate mix of general fund taxes.

Distribution of a portion of the state’s annual
individual income tax revenues to localities.

Constitutional amendment requiring a sharing of
state individual income tax revenues with localities.

Maintenance of a low tax burden on businesses

Tax incentives for economic growth.

Equalization of the taxing authority of counties
and cities.

No new unfunded mandates on local governments by
the Commonwealth.

Creation of a tribunal, not located within or reporting
to the Department of Taxation, to hear taxpayer appeals.

Creation of a permanent body to analyze, on a continuing
basis, the fiscal needs and resources of Virginia’s state and local
government.

Tax Simplification ---more user friendly.

Local user fees.

An additional subcommittee was formed to look at issues
four and five, specifically the preferences (subtractions, deductions,
exemptions, tax credits) outlined in the Code. The subcommittee will review
the preferences and determine whether they are still effective or obsolete.
The task force discussed issue six at length and requested additional
information about state funding for counties and the difference in services
offered between counties and cities.

Several questions were raised by the task force for
its next meeting and a request that a representative from the Morris Commission
come to explain issue nine, creation of a permanent body to analyze the
fiscal needs and resources of state and local government. In addition,
the discussion of local user fees and the administrative procedure for
tax appeals was placed on the agenda for the next meeting. To date, the
task force has received a wealth of information and intends to formulate
more concrete policy statements and legislative proposals at its next
meeting.

The full joint subcommittee had previously scheduled
a meeting for August 19, 2002. Task Force #1 and Task Force #2 agreed
that more work needed to be done on their respective issues. As a result,
the separate groups will meet and members will be polled for another date
for a joint meeting. Task Force #1 members also agreed that public hearings
would have to occur later in the year (possibly in October) than previously
discussed due to the extended work sessions.